Question

Rodgers Industries pays a current dividend of $5.50 and shareholders require a 14% return. The dividend...

Rodgers Industries pays a current dividend of $5.50 and shareholders require a 14% return. The dividend will grow at a high rate of 20% and then gradually decline to 4% over an eight-year period. The value of Rodgers Industries shares using the H Model is closest to:

Group of answer choices

$127.60.

$92.40.

$90.20.

$79.20.

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Answer #1

Stock Value = (D0(1+2)/(r-92) + (DO*H*(81-82)/(r-92) = $ 92.40 (5.5*(1+0.04))/(0.14-0.04)+(5.5*(8/2)*(0.2-0.04)/(0.14-0.04)

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